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5.2% Mass. jobless rate forecast in 2017

The state’s economic expansion, after advancing in fits and starts through 2013, should solidify next year and begin a period of steady but modest job growth, according to a new forecast.

Released Wednesday by the New England Economic Partnership, it estimates employment in the state will increase at an average annual rate of 1.4 percent, or about 45,000 to 50,000 jobs a year, through 2017. By the end of next year, the total number of people employed in the state should surpass the record high, reached in 2001 shortly before the dot-com bubble burst, according to the nonprofit forecasting group.


The Massachusetts unemployment rate is projected to decline to 5.2 percent by mid-2017, compared to 7.2 percent in August. That would still be well above the record low of 2.6 percent, set in October 2000.

Earlier this year, Massachusetts had regained all of the jobs lost in the last recession, but the economy has since created jobs more slowly than expected. Employers cut jobs in five of the first eight months of 2013, state statistics show, and the unemployment rate has risen nearly a point since March, when it fell to 6.4 percent.

Alan Clayton-Matthews, the Northeastern University economics professor who prepared the forecast, blamed the start-and-stop growth largely on federal budget and tax policies. The automatic budget cuts known as sequestration and an increase in federal payroll taxes weighed on the economy earlier this year, while last month’s partial US government shutdown is expected to slow the economy in the last few months of 2013.

Economic and employment growth in the state are projected to pick up next year, then accelerate to an annual rate of nearly 2 percent, or roughly 70,000 jobs a year, before slowing significantly in 2016 and 2017, according to the forecast.

The fastest job growth over the next few years is projected to come in construction, professional and business services, which includes a variety of technology and scientific research firms, leisure and hospitality, which includes hotels and restaurants, information, a tech-related sector, and education and health services.


Sustained job growth, rising home prices, and a bull market in stocks have added to household income, which is projected to further increase, bolstering consumer-based industries such as restaurants, retail, and real estate, Clayton-Matthews said.

And an aging population — here and in much of the rest of the world — will boost health care industries, including hospitals, biotechnology, and medical devices. “The fastest-growing demographic will be those that are over 65,” said Clayton-Matthews.

Housing should remain a bright spot — home prices have been rising consistently for more than a year — with the statewide median price regaining its prerecession peak before the end of 2017, according to the forecast.

Home sales rose by almost 14 percent in August, making it the state’s best month since the housing market peaked in 2005, while the median price of a single-family home climbed nearly 11 percent, to $340,000, from $307,500 a year earlier, according to Warren Group, a Boston firm that tracks local real estate.

Incomes are expected to increase faster than home prices, so residential real estate should be as affordable as it was in the mid-1990s and early 1980s — periods of moderate prices and appreciation.

The number of building permits issued rose 30 percent from August 2012 to August 2013, suggesting confidence among builders that sales and prices of homes will continue to increase, Clayton-Matthews said. “This has been a long nightmare for the housing market,” Clayton-Matthews said. But “everything indicates that the housing market is coming back strong.”


Emily Overholt can be reached at emily.overholt@globe.com. Follow her on Twitter @emilyoverholt.